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involves a situation where the company reaches an agreement with its creditors for
the satisfaction of their claims otherwise than by payment in full. 28
In the UK, the prime objective is to bring the company to profitability, and if
liquidation is inevitable, the administrator should opt for a course of action such as a
company voluntary arrangement (CVA). It should be noted, nevertheless, that an
administration does not always result in a restructuring or reorganization of a
company. The recommendations made by an administrator would depend on the
information obtained from the company during the period of administration. There
are many forms of agreements which can be achieved between a company and its
creditors and the usual types of CVA are the composition 29 and scheme of
arrangements. 30
The Malaysian Companies Act 1965 provides for reconstruction of companies in
section 176. The section sets out several modes; namely a compromise scheme, 31 a
moratorium 32 scheme of arrangement, arrangements under section 176(11) which
involve the reorganization of rights and liabilities of members, transferring assets of
one company to another controlled by the same shareholders, amalgamation, or in
28 Ibid.
29 An agreement by which creditors accept in single sum or by installment, an amount less than that
due to them; see Goode above n12 at 26.
30 Embracing such diverse schemes as conversion of debts into equity subordination of secured and
unsecured debt, conversion of secured into unsecured claim and vice versa, increase or reduction of
share capital and other forms of reconstruction and amalgamation (Goode above n12 at 26). The
same modes apply to New Zealand, Australia and Malaysia.
31 A compromise scheme is a method in which creditors agree to accept a lesser payment than they are
owed for the full settlement of debts. This scheme may also include both a moratorium and
compromise or some creditors may agree to convert their debts into shares in the company; see also
Krishnan Arjunan and Low Chee Keong above n4 at 409.
32 A moratorium scheme is to enable the company to continue in business and eventually to pay its
debts in full. A deferment, however, is given to the company to settle its debts, hence the
moratorium. During this period, the company is managed by the scheme administrator or a manager
appointed by creditors. 32 Pursuant to the amendment in 1998, there is a moratorium of 90 days, or,
for good reason, a longer period can be granted by the court for a scheme of arrangement or
compromise; See Krishnan Arjunan and Low Chee Keong above n4 at 409.
315